Apple leads techs higher; Dow suffers small loss

A weaker-than-expected factory-orders report dismays traders, but the blue chips drop 17 as short-covering trims losses. Facebook falls below $27 on an analyst 'sell' rating. Apple recovers from steep loss. China's services sector expands.

By Charley Blaine Jun 4, 2012 12:59PM
Charley BlaineUpdated: 2:30 a.m. ET Tuesday

Given how badly things looked at, say, midnight ET or early this afternoon, a finish that basically left the market with small gains is a victory. Except that the risks the market faces -- turmoil in Europe and a slowing economy at home -- are still in place and could weigh on markets on Tuesday.

The Dow Jones industrials ($INDU) were down slightly, but the  Standard & Poor's 500 Index ($INX) finished with a small gain. The tech-heavy Nasdaq Composite Index ($COMPX) ended solidly higher as Apple (AAPL) rebounded to $564.29, up $3.30.

Short-covering was the likeliest candidate to explain the rebound that saw the Dow fall as many as 83 points before rebounding and even briefly showing a small gain. In short-selling, an investor borrows shares from a brokerage and sells, hoping to profit later when he buys the shares back and returns them to the brokerage.

Utility stocks were mostly higher. Sodastream International (SODA) shares were up $1.73 to $31.97. Amazon.com (AMZN) and Google (GOOG) were leading technology higher.  Chesapeake Energy (CHK) shares were up 94 cents to $16.52 after the company said it will replace four directors, a nod to activist shareholder Carl Icahn, who owns a 7.6% stake in the company.

The Dow finished down 17 points to 12,101. The S&P 500 was ahead -- barely -- to 1,278. The Nasdaq, however, rose 13 points to 2,760. The Nasdaq-100 Index ($NDX) finished up 19 points to 2,478.

Article continues below.
The market opened modestly higher today on reports that European leaders were considering a master plan to bring budgets, banking and political systems under tighter control.

But the rally was snuffed out by the realization that considering a plan doesn't mean it's going to happen any time soon. Then, the U.S. government said April factory orders were weaker than expected,  and a report from the Institute for Supply Management's New York Chapter showed activity pulling back.

China's non-manufacturing purchasing managers index fell to 55.2 in May from 56.1 in April. The report meant that China's services sector is still expanding but is doing so at the slowest pace in more than a year.

While short-covering probably is the biggest cause for today's rebound that came in the afternoon, there was also news that finance ministers of the United States, Canada, Germany, France, Britain, Japan and Italy will hold a conference call Tuesday to discuss European financial crisis.

The news came as Germany sent signals that it would eventually be willing to lift its objections to ideas such as common euro-zone bonds if other European governments were to agree to transfer further powers to Europe.

There's also new speculation that the Federal Reserve may decide to start a new effort of asset purchases to stimulate the economy.

That, however, is a very big "if." Many European countries, especially France, are loathe to give up any sovereignty. And one wonders if the emotional wounds of World War II may be an issue as well.

Tuesday's market features the Institute for Supply Management's Non-Manufacturing Index for May plus non-manufacturing indexes from the European Union and Germany.

Futures trading suggests a solidly higher open.

One reason for the uptick: China's services sector expanded at its fastest pace in 19 months in May. In a report released Tuesday morning, HSBC said the gain was driven by new business and improvements in confidence about the future. HSBC's China services Purchasing Managers' Index rose to a seasonally adjusted 54.7 in May, up from April's 54.1. However, the result remained below the long-run trend of 56.7,

Starbucks setting up a fight with Panera Bread?
After the close, Starbucks (SBUX) said it was buying Bay Bread, the parent of the French bakery chain La Boulange, for $100 million in cash.

La Boulange operates 19 cafes in the San Francisco Bay Area. Starbucks is also hiring chef Pascal Rigo to help update menus at Starbucks stores as well as at La Boulange.

Investors saw the deal as a signal Starbucks plans to go after Panera Bread (PNRA). Panera shares fell $1.67 to $140.22 in regular trading and an additional $2.22 in after-hours trading.

Starbucks closed up $1.75 to $53.90.

Separately, shares of discount retailer Dollar General (DG) were off $1.22, or 2.5%, to $47.27 after hours. The share-price decline was due to the disclosure that key shareholders, including Kohlberg Kravitz Robers & Co. and Goldman Sachs, were reducing their stakes in Dollar General.

Dollar General earned 63 cents on revenue of $3.9 billion in the fiscal first quarter. That was up from 45 cents in earnings on revenue of $3.45 billion a year ago. Analysts had expected 60 cents in earnings and revenue of $3.83 billion.

Facebook sees more selling
Facebook
(FB) tried but failed to finish above $27 after falling to as little as $26.44, a new low since its May initial public offering. Sanford Bernstein initiated coverage on the stock with a "sell" rating and a $25 price target. The shares closed down 82 cents to $26.90.

"It is difficult to argue for owning the stock today," wrote Bernstein analyst Carlos Kirjner in a research report today.

A near-term slowdown in sales growth will fuel investor concerns about full-year 2013 sales, Kirjner wrote. The deceleration may "prove to be a temporary setback if, over time, Facebook manages to improve monetization of its inventory, both PC- and mobile-based, and maximize the value of social advertising," Kirjner wrote.


Facebook is developing tools to let children younger than 13 use the site with parental supervision, a move that may rekindle privacy concerns, The Wall Street Journal reported Sunday. 


Another potential issue for Facebook: Google is expected to launch a new small-business marketing product that leverages Google+, Offers, Wallet and other products. 


Google was up $7.61 to $578.59.


Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$83.98

$83.23

-2.95%

-15.03%
(per barrel)











Heating oil (-HO)

$2.6269

$2.6279

-2.82%

-9.86%
(per gallon)











Natural gas (-NG)

$2.4150

$2.3260

-0.29%

-19.20%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6707

$2.6568

-1.91%

0.50%
(per gallon)











Brent crude 

$98.85

$98.43

-2.96%

-7.94%
(per barrel)











Retail gasoline

$3.5850

$3.5900

-0.97%

9.43%
(per gallon; AAA)












The jobs report still weighs on the market

Despite the gains, the market is vulnerable at best and still reeling from the May jobs report, which showed only 69,000 jobs added to the economy. Industrial and financial stocks are the weakest sectors.

JPMorgan Chase (JPM), Caterpillar (CAT) and General Electric (JPM) were the laggards among the 30 stocks. Home Depot (HD), up 80 cents to $48.76, was the leader.

JPMorgan was down 93 cents to $31 because of European concerns and because of a report in The New York Times that a group of investors warned the banking giant a year ago that its risk controls were weak.

The Dow's loss was its fourth in a row. The blue-chip index is down 1% for the year. The S&P 500 is off 9.9% from its closing peak of 1,419.04 on April 2 -- and just below the threshold of 10%. If measured from 1,422.38, its intraday high on April 2, the index is off 10.1% and thus in a correction.

There is no ambiguity about the Nasdaq. The index is down 11.6% from its peak on March 26.

There is talk the market has further to fall. The uncertainty in Europe appears to be affecting business in the United States, and there's talk the S&P 500 could fall to 1,100. However, there is an important support level that has tended to bring in buyers at 1,125.

Things could be worse. Germany's Xetra Dax Index ($DE:DAX) is off 16.5% since peaking in March. France's CAC-40 Index ($FR:PX1) is down 17.8%. Britain's FTSE-100 Index ($GB:UKX) is down 11.8%. Japan's Nikkei-225 Index ($JP:N225) has fallen 19.1%.

Spain's Ibex 35 Index ($ES:IB) is off 41% in the last 11 months. The index was up 165 points to 6,240 today, however, after a report on Spanish unemployment showed modest job gains. But the unemployment rate was still 24.4%.

Gold settles lower; crude oil rebounds
Crude oil (-CL) reversed course and settled up 75 cents to $83.98 a barrel in New York. It was above $84 in electronic trading. All on a day when it had fallen to as low as $81.21. Brent crude also was rallying, hitting $98.68 a barrel, up 25 cents after dropping to $95.63 in overnight trading.

The retail price of regular unleaded gasoline was averaging $3.585 a gallon, according to AAA's Daily Fuel Gauge Report. That's still up 9.4% for the year but down 8.9% from its peak in early April.

Gold (-GC) settled down $8.20 to $1,613.90 an ounce. Silver (-SI) dropped 50.5 cents to $28.007 an ounce. Copper (-HG) slipped to $3.307 a pound.

The 10-year Treasury yield was up slightly to 1.524% from Friday's at 1.467%.

Short hits from the markets -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0700%

0.070%

0.00%

600.00%
5-year Treasury note 

0.681%

0.620%

1.49%

-17.95%
10-year Treasury note

1.527%

1.467%

-3.42%

-18.39%
30-year Treasury bond

2.571%

2.540%

-3.78%

-11.01%
Currencies











U.S. Dollar Index

82.661

82.973

-0.56%

2.66%
British pound

1.5411

1.5380

-0.02%

-0.82%
(in U.S. $)

 








U.S. $ in pounds

£0.649

£0.650

0.02%

0.82%
Euro in dollars

$1.25

$1.24

1.11%

-3.54%
(in U.S. $)

 








U.S. $ in euros

€ 0.800

€ 0.804

-1.10%

3.67%
U.S. $ in yen 

78.31

78.10

-0.31%

1.57%
U.S. $ in Chinese

6.35

6.37

-0.45%

0.42%
yuan











Canada dollar

$0.964

$0.963

-0.42%

-1.70%
(in U.S. $)

 








U.S. dollar 

$1.038

$1.039

0.42%

1.72%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,613.90

$1,622.10

3.18%

3.01%
(per troy ounce)

 








Copper (-HG)

$3.307

$3.314

-1.74%

-3.75%
(per pound)

 








Silver (-SI)

$28.0070

$28.5120

0.90%

0.33%
(per troy ounce)

 








Wheat (-ZW)

$6.2775

$6.1225

-2.49%

-3.83%
(per bushel)

 








Corn (-ZC)

$5.6800

$5.515

2.30%

-12.14%
(per bushel)

 








Cotton 

$0.6778

0.6885

-5.66%

-26.07%
(per pound)

 








Coffee

$1.6080

1.5985

-1.32%

-29.98%
(per pound)

 








Crude oil (-CL)

$83.98

$83.23

-2.95%

-15.03%
(per barrel)










 

165Comments
Jun 4, 2012 2:35PM
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"But the rally was snuffed out by the realization that considering a plan doesn't mean it's going to happen any time soon."

 

Gee you mean just because someone is "considering" a plan means it may not actually happen or it may not even work?  What a concept!!  This is the type of hype and propaganda we've been dealing with here in the USA for months now and it seems to work to drive our markets up so why doesn't the European version work?  Maybe they see beyond the bullsh*t??

Jun 4, 2012 2:28PM
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And olderchum.....You really want Bad Hair Frumpy, bankrupting America..??

 

Have we forgot that his brightest claim to fame, is declaring Bankruptcy and screwing his backers?? 

Jun 4, 2012 2:27PM
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The lower it goes, the more that middle and lower classes can afford.
Jun 4, 2012 2:26PM
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veteran_lender: You are missing a very important detail. Reno was threatening banks back in the 90's that if they did not "diversify" their lending, they would be harassed, investigated and sued. The government did some heavy arm twisting. They would have denied banks overnight Fed loans, and taken other adverse action(s) against lenders that did not play along.

 

Remember the day(s) when you needed 20% down in order to qualify for a loan? I do, and that is how I bought my first home. In the mid-90's the whole idea of 20% down and proving one's income, went out the door. So again, government messed-it-up.

Jun 4, 2012 2:26PM
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People were so conditioned to see gas prices hovering at $4/gallon for so long, now are giddy to see it at $3.30/gal. Just imagine what would happen if gas dropped under $3/gallon and stayed there for awhile.  Consumer spending would rise and the all benifits of a healthy economy would be back on track.  more job creation for demand for durable goods, people would take that vacation they put off..and so on..  I know...dream on

Jun 4, 2012 2:25PM
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Stocks keep sagging, but they always seem to stay above 12,000. Could that be a government stench I smell?!
Jun 4, 2012 2:21PM
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I think Trump should do more than just endorse Romney. Just imagine if he were to be Vice President. It would sure shut up the left wingers who keep bashing Romney's record in the private sector. The only problem is every left wing political action group would dig up so much dirt on the Donald that he wouldn't have a chance to do what is right for the country because discrediting the opponent is the only option to gain votes when you work for a campaign backing an administration with such a dismal record.
Jun 4, 2012 2:09PM
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If you compare the cost of gasoline pegged to the cost of oil when oil was $140 a barrel, gasoline was 4.00 a gallon.  At the same ration, oil at an average of $94 a barrel should have gasoline at $2.68 a gallon instead of the $3.40 I am paying.  It can't be inflation because the government has said ther is no inflation in food and energy.  That leaves a 32% difference in price and since speculation adds 28%-40% to the cost of gasoline, its not the Oil Companies making the extra.  Its time to cut the Wall Street speculators off from the teat. 

 

Bernanke is not going to let the stock market fall much farther, he still has Operation Twister money to dole out to his cronies until the end of June.  Rest assured there will be another QE plan to keep Wall Street and the Big Banks funneling money into the D-PACS through market manipulation.

Jun 4, 2012 2:07PM
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deccles: the economic melt-down is a result of government involvement. The government wanted more community reinvestment act (CRA) policies that forced lenders to make sub-prime loans. Sub-prime orignated with government controlled Freddie and Fannie... I know and have studied business since late 1980's and wrote papers about banks being forced to loan to certain "communities" in the name of fairness... Bottom Line: Everything the government does to the economy or to "help" people usually ends-up costing more, while quality declines... Conversely, the private sector has costs that decline and quality that improves.
Jun 4, 2012 2:02PM
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Deflation?  We have increased the money supply 41% since Obama is in office.  We are awash in money.  You cannot have deflation with 41% more cash in circulation.    

What we have is fear of Obama and the Democrats.  No one will spend fearing higher taxes.  Seniors, with near zero interest income will not spend.  People don't want to go deeper into debt.  Banks will insist on being repaid.  

We are now almost 4 year into the failed policies of Obama.  Things are getting worse, not better.  He managed to drive unemployment sky high, he drove the debt to insane levels, and he wants to continue  SPENDING, BORROWING and TAXING...

We need to fire Obama and as many of his donkey henchmen as possible.
Jun 4, 2012 2:02PM
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"Wall Street" / financial institutions are the capital allocation group in the capitalist free market system.  They only reflect the sentiments and actions of what everyone collectively is doing.  If you regulate or protect them, you always end up with MISALLOCATION AND BUBBLES.

Stop the regulating and the next time there is a panic, don't listen to anyone who says we've got to save these institutions to save ourselves.  Stop your representatives from robbing us all and SAVE YOURSELF  LET THEM BURN AND LEARN.

Jun 4, 2012 2:02PM
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I would not trust any "economic" solutions coming out of Europe. Any trust would be nothing more than false hope in order to kick the can down the road. Austerity, no austerity, it really does not matter. Austerity does not address the fundamental problem of learned helplessness championed by these uber-socialistic countries. You cannot change the fruit, until you change the root. Socialism breeds an immature society, whose citizens blame each other for their woes, but take no responsibility themselves.

Jun 4, 2012 1:59PM
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"Get the government (all governments) out of the way, and free-market forces will right the ship."

 

 

WRONG...cannot do the above...last time we did the righty bankers and their Wall St friends raided the cookie jar and, therefore, cannot be trusted. Wall St trades, shorts, CDS all the slimey investment vehicles they 'invent' must be regulated before they cause 2008 Part II.

Jun 4, 2012 1:56PM
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Ever wonder what it might be like to live in a world without consequences? Well, we've had a good look at it for more than 20 years now. How did it work out for you? What did you get away with? And how do you plan to hang onto it?
Jun 4, 2012 1:56PM
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I love it when Traders are 'dismayed'...

Jun 4, 2012 1:55PM
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Stocks can't catch a break? Give us a break! Catching a break presumes luck, and not fundamental structural economic policies. There is no recovery because the economic policies favored by leftists are extremely flawed (and that is saying it nicely). Get the government (all governments) out of the way, and free-market forces will right the ship. Stop giving hand-outs to all the moochers (Greece, Spain, France, Italy, etc), and reward producers, workers and consumers with lower taxes and incentives to produce, work, and consume.
Jun 4, 2012 1:51PM
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I've said it before; compressive deflationay contraction. Whether you believe it or not makes no difference, it is here. We need to forget about 'return to growth' ;it will not happen. Ever. If we don't manage contraction it will manage us.
Jun 4, 2012 1:50PM
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For the jobs report, they do not tell you that the majority of those jobs in the last two months that were created were part time jobs. Maybe we can work two part time jobs to get  40 hours a week and then multiply that by taking 3 x more part time jobs at the minimum wage of $8.+/hour so we can average $50 k/year wages.
Talk the Joe Biden plan -- no sleep for everyone!!!

Jun 4, 2012 1:49PM
avatar

The slowdown in China-Bad News on the Jobs front- Bad news from Europe are just the beginning. Because of the failure to pass a Budget last year, $600 Billion in manditory cuts are going to be made to our defense budget in January of 1013. This will cause major and widespread cuts and layoffs among defense contractors and the multiplier effect will further cripple our economy.

Oil may continue to fall, but look for a production cut from OPEC to try to keep the price from falling below $80 per bbl. I doubt that even this will stop it from reaching $75 because of the continued decrease in demand because fo the slowdown.

 

I am still looking for DOW 10,000 by the election. This may bring about a change in the White House, but unless major changes are made to our spending/debt problem not even that will stop the inevitable.

Jun 4, 2012 1:47PM
avatar
You can bet on a steady decline in the markets UNTIL after the election. I'd say buy Oil, but with all of America to soon be unemployed, and once the Republicans make minimum wage illegal, no one will be able to afford it, nor anything else. We shall soon find ourselves in debtor's prisons that soon shall be more than full and Constitutionally legal, if one side has their way and say.
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